State Handbook of Economic, Demographic, and Fiscal Indicators 2008 New Jersey by David Baer PUBLIC POLICY INSTITUTE AARP
Introduction The State Handbook of Economic, Demographic, and Fiscal Indicators 2008 represents the seventh edition of the state handbook series. We produce a new updated handbook biennially. It is an easy-to-use reference book for anyone in search of up-to-date information about state economic, demographic, and fiscal conditions. Policymakers, public officials, and policy analysts will find useful data on such topics as population, poverty rates, per capita state personal income, state and local revenues, expenditures, tax rates, and property tax relief programs. Gender and age comparisons are provided for some of the data. Throughout the book we use the most current data available. This handbook facilitates state-by-state and state-national comparisons, which can serve a variety of purposes. For example, a state's tax burden can be compared with the national average or with that of other states in the region. Per capita state personal income, unemployment, and median household income can be used to assess how residents in one state fare vis-à-vis those in another. State Economic, Demographic, and Fiscal Summaries This part of the book features economic, demographic, and fiscal summaries of the entire United States, each state, and the District of Columbia, along with summaries for the Virgin Islands and Puerto Rico. Most of the book s information is presented in this section. Users will find statistics on several major economic indicators, such as state personal income, median household income, and employment, as well as on population and poverty, distribution of household income, revenues, expenditures, tax rates, and debt ratio measures. A section on state-specific property tax relief summarizes homestead exemptions and credits, circuit breakers, and tax deferral programs, all of which are defined in the source notes and explanations section at the end of the book. We did not include all of the property tax rates, because they can vary within states, and because data on the varying rates are not easily available. In addition, nominal rates often do not equal effective rates. Homestead exemptions are reductions in the amount of assessed property value subject to taxation. When reporting homestead exemptions, we note the assessed property value; however, the value of the tax reduction depends not only on the assessed property value but also on the fractional assessment level. For example, the fractional assessment percentage in Alabama is 10 percent for residential property, so the reported exemption value of $4,000 translates into an exemption of $40,000 in fair market value ($4,000 divided by 0.1). For this reason, assessed values must first be converted into fair market values before comparing homestead exemptions among states. 1
The section on state and local general revenues and expenditures shows revenues and expenditures per capita and as a percentage of state personal income, as well as average annual changes from 1995 to 2005. The year 2005 was the most current year for which we could obtain revenue and expenditure data from the U.S. Census Bureau. Comparisons of the amounts spent on expenditure programs can be made between each state and the national average. State and local debt information is provided on a per capita basis and per $1,000 of personal income. The composition of short-term and long-term debt is also presented. Since the 2006 Handbook, the U.S. Bureau of Economic Analysis (BEA) no longer identifies a state s gross domestic product as gross state product; instead, BEA identifies a state s gross domestic product as gross domestic product by state. Therefore, we replaced the words gross state product with the words gross domestic product. However, gross state product and gross domestic product by state refer to the same exact measure of a state s economy. Since we are now collecting poverty rate data from the American Community Survey (ACS) instead of the Current Population Survey (CPS), we no longer report the poverty rate in the economic indicators table (the first table in the state summaries). This is because we will not be able to make a 10-year comparison of state poverty rates until ACS has 10 years of poverty data. First, with the health and long-term care state income tax exemptions and credits, we describe only those state tax exemptions and credits that are more generous than those allowed on the federal return. Therefore, we exclude tax exemptions, e.g., medical savings account deductions, which are found in federal adjusted gross income. Further, we exclude state itemized deductions, since we only want to describe tax exemptions and credits that benefit all taxpayers, not just those who itemize. Therefore, all the state health and long-term care tax provisions described here are available to all state filers, whether they itemize or not. Finally, since we are only interested in the general population, we exclude state health and long-term care tax breaks that are targeted specifically for self-employed persons. Second, we describe how the state tax income base is related to the federal income tax base, such as federal adjusted gross income. The state income tax base may be unrelated to the federal base; it may link to federal adjusted gross income (AGI), federal taxable income, or to federal gross income. If state taxable income is unrelated to federal income, we say that the state s income tax base is not directly related to federal income. Third, we highlight the minimum income levels at which taxpayers must file their state income taxes. Fifth, because some states have local expenditure limits which may affect the amount of property taxes collected, we describe how localities limit the growth of their expenditures. 2
Tables and U.S. Maps The handbook provides tables and maps of selected state economic, demographic, and fiscal data (found primarily in the economic, demographic, and fiscal summaries part). This presentation of the data makes it easy to compare any or all states and the District of Columbia on such economic indicators as per capita income or gross state product. The tables provide state rankings for easy comparisons. We do not include Puerto Rico and the Virgin Islands because the data are either unavailable or not as current as state data, in the tables. Data Sources and Explanations Data sources and explanations of concepts or terms can be found in this part of the handbook. Most of the information in the handbook comes from the U.S. Bureau of the Census. This includes poverty rate by age group and household income by age group from the American Community Survey, median household income from the Current Population Survey, population estimates by age group based on decennial census data, and revenues and expenditures from the Census of Governments. We collected economic data, such as per capita income and gross domestic product by state, from the U.S. Bureau of Economic Analysis and employment data from the U.S. Bureau of Labor Statistics. In addition, we obtained tax rate and property tax relief information from a survey of state and local government offices, such as state legislative offices and state and local assessors offices. For Puerto Rico and the Virgin Islands, we collected household income, poverty rate, and population data from U.S. decennial census data. Employment data came from the U.S. Bureau of Labor Statistics (Puerto Rico) and the Virgin Island s Bureau of Economic Research. Per capita income came from Puerto Rico s Department of the Treasury and the U.S. Census Bureau (Virgin Islands). Tax rates, general revenue, and general expenditure data came from Puerto Rico s Department of the Treasury, the Virgin Islands Office of Management and Budget (revenues), the U.S. Internal Revenue Service (income tax data), and the Virgin Islands Bureau of Internal Revenue (miscellaneous tax data). As state and local economic conditions and demographic patterns change, policymakers may consider adjusting their policies on taxes and spending programs. These adjustments become more difficult when economic and demographic changes depart from historical trends. It is our belief that this publication will contribute to more informed public policy decisions by identifying significant economic, demographic, and fiscal changes. 3
Economic Indicators 1996 2006 Average Annual Change 1996 2006 NJ US NJ US NJ US Per Capita Income... $30,470 $24,175 $46,328 $36,629 4.3% 4.2% Median Household Income... $47,468 $35,492 $68,059 $48,201 3.7% 3.1% Gross State Product (in millions)... $281,806 $7,659,651 $453,177 $13,149,033 4.9% 5.6% Full- and Part-Time Positions (in thousands) 4,386 152,150 5,116 178,343 1.6% 1.6% Employed Persons (in thousands).. 3,926 126,708 4,309 144,427 0.9% 1.3% Unemployment Rate... 6.2% 5.4% 4.6% 4.6% Sources: U.S. Bureau of the Census, U.S. Bureau of Economic Analysis, and the U.S. Bureau of Labor Statistics 2006 Population Under Age 18 6% 5% Males 25% 7% 8% Females 23% Ages 18 to 64 Ages 65 to 74 Ages 75 and Over 64% 62% Population Poverty Rate Population and Poverty Percentage Change 1996 2006 1996 2006 2006 NJ NJ NJ US NJ US Total Population... 8,009,624 8,724,560 8.9% 12.9% 8.7% 13.3% Males... 3,877,750 4,262,291 9.9% 13.9% 7.7% 11.9% Under Age 18... 1,015,459 1,068,295 5.2% 6.6% 11.7% 18.2% Ages 18 to 64... 2,418,882 2,730,637 12.9% 17.4% 6.4% 10.1% Ages 65 to 74... 265,387 252,787-4.7% 4.0% 6.1% 6.9% Ages 75 and Over... 178,022 210,572 18.3% 25.1% 6.4% 7.7% Females... 4,131,874 4,462,269 8.0% 11.9% 9.6% 14.7% Under Age 18... 967,057 1,021,043 5.6% 6.8% 12.0% 18.5% Ages 18 to 64... 2,508,261 2,776,843 10.7% 15.0% 8.8% 13.8% Ages 65 to 74... 338,826 306,607-9.5% -1.0% 8.6% 10.2% Ages 75 and Over... 317,730 357,776 12.6% 17.3% 10.7% 13.5% Source: U.S. Bureau of the Census 229
Percent Distribution of Households by Age of Householder and Income, 2006 Less than $10,000 $10,000 to $14,999 $15,000 to $24,999 $25,000 to $34,999 $35,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 or more All Households Age of Householder Under 25 years... 17.9% 6.9% 15.2% 12.2% 16.4% 16.7% 9.1% 5.5% 100.0% 25 to 44 years... 4.4% 2.6% 6.1% 7.4% 12.6% 19.6% 16.2% 31.1% 100.0% 45 to 64 years... 4.3% 2.8% 5.2% 6.1% 10.3% 18.2% 15.2% 37.9% 100.0% 65 years and over... 9.4% 10.2% 17.6% 12.6% 14.5% 15.1% 8.4% 12.3% 100.0% New Jersey (all ages)... 5.7% 4.4% 8.4% 8.1% 12.2% 18.0% 14.0% 29.2% 100.0% United States (all ages). 8.0% 5.9% 11.4% 11.2% 14.8% 19.0% 11.8% 17.9% 100.0% Source: U.S. Bureau of the Census Percent of Households by Household Income Bracket, 2006 Percent of Households 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Less than $10,000 $10,000 to $14,999 $15,000 to $24,999 $25,000 to $34,999 $35,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 or more New Jersey United States 230
State and Local General Revenues, FY 2005 New Jersey Average Annual Revenue Change 1995 2005 General Revenues Per Capita Percent of Personal Income (millions) NJ US NJ US NJ US Total General Revenues... $66,438 $7,634 $6,816 18.4% 20.8% 4.8% 5.6% Own Sources... $55,812 $6,413 $5,338 15.4% 16.3% 4.6% 5.3% Taxes... $42,557 $4,890 $3,698 11.8% 11.3% 5.0% 5.2% Property Taxes... $19,197 $2,206 $1,132 5.3% 3.5% 4.6% 5.1% General Sales Taxes... $6,552 $753 $887 1.8% 2.7% 4.7% 5.1% Personal Income Taxes. $8,224 $945 $813 2.3% 2.5% 6.1% 5.7% Other Taxes... $8,584 $986 $866 2.4% 2.6% 5.2% 4.9% Charges/Miscellaneous... $13,254 $1,523 $1,640 3.7% 5.0% 3.5% 5.7% Federal Aid... $10,627 $1,221 $1,478 2.9% 4.5% 5.7% 6.7% Source: U.S. Bureau of the Census (2005 data are the most current available.) 1995 General Revenue 2005 General Revenue Property Taxes 15% 16% General Sales Taxes 29% 29% Personal Income Taxes Other Taxes 23% 20% Charges/Misc Federal Aid 12% 11% 10% 13% 12% 10% 231
I. Personal Income Tax (2006) State Income Tax Base New Jersey s income tax base is not directly linked to the federal income tax base. Filing Requirements Taxpayers must file if their gross income exceeds $10,000 (single) or $20,000 (married, filing jointly). Rate Structure Single Married, Filing Jointly Taxable Income Rate Taxable Income Rate First $20,000 1.4% First $20,000 1.4% $20,001 $35,000 1.75% $20,001 $50,000 1.75% $35,001 $40,000 3.5% $50,001 $70,000 2.45% $40,001 $75,000 5.525% $70,001 $80,000 3.5% $75,001 $500,000 6.37% $80,001 $150,000 5.525% Over $500,000 8.97% $150,001 $500,000 6.37% Over $500,000 8.97% Public and Private Pension Exemptions Generally, public pensioners age 62 or older or disabled with gross income of $100,000 or less qualify for pension exemptions of $15,000 (single) or $20,000 (married, filing jointly). However, military pensioners meeting the same age and income criteria qualify for a full exemption of their military pension income. Additional Retirement Income Exemption Taxpayers age 62 and older who did not claim the maximum allowable pension exemption may be able to claim an additional retirement income exclusion if their wages, net profits from business, partnership income, and S corporation income equal $3,000 or less. The additional retirement income exclusion equals the difference between the maximum pension exemptions (shown above) and the amount a taxpayer claims for the pension exemption. Taxpayers who have never received and never will receive or be eligible for Social Security or Railroad Retirement benefits may be able to receive an additional retirement income exemption up to $3,000 (single) or $6,000 (married, filing jointly). Sources: AARP 2007 telephone survey of state legislative staff, state departments of revenue, state controllers offices, state assessors offices, and state treasury offices. 232
Social Security Benefits... Full exemption Medical Expense Deduction Expenses in excess of 2% of income can be deducted. This is not an itemized deduction. Medical expenses involving contributions to a medical savings account or amounts taken as a deduction for self-employed health insurance cannot be deducted. Personal Exemptions Combined Under age 65... $1,000 (single); $2,000 (married, filing jointly) Age 65 and older... $2,000 (single); $4,000 (married, filing jointly; both spouses are age 65 or older) Local Income Taxes... None II. General Sales Tax Rates (2006) State... 7.0%* Combined state/local tax rates... 7.0%* *Some areas, known as urban enterprise zones, are allowed to levy a general sales tax of 3%. III. Miscellaneous Tax Rates (2006) Corporate income (highest marginal rate)... 9.0% On all taxable income Gasoline (per gallon)... $0.105 An additional $0.04-per-gallon gross receipts tax is also levied for a total of $0.145 per gallon. Cigarette (per pack of 20)... $2.575 Beer (per gallon)... $0.12 IV. Real Property Tax Relief Programs (2007) Homestead Credit Requirements Benefits Homeowners age 65 and older, or who are totally disabled, or their surviving spouses age 55 or older with incomes not over $10,000 (excluding Social Security benefits or a government pension up to the maximum benefit amount allowed for Social Security, whichever is greater)... $250 property tax deduction Sources: AARP 2007 telephone survey of state legislative staff, state departments of revenue, state controllers offices, state assessors offices, and state treasury offices. 233
100% disabled veterans or surviving spouses... Total property tax exemption Veterans or surviving spouses of veterans... $250 property tax deduction Homeowners and renters under age 65 whose income is more than $10,000 (single) or $20,000 (married, filing jointly) or homeowners and renters age 65 and older (all incomes) are eligible for a property tax credit or deduction.... Deduction equals the total amount of property taxes paid (or 18% of the rent paid for renters) up to $10,000 from their taxable personal income for income taxes.* *If the tax savings from this deduction exceeds $50, taxpayers would take this deduction. However, if the tax savings from this deduction does not exceed $50, taxpayers would not take this deduction but instead would take a $50 refundable tax credit off their income taxes. Residents whose income is less than $10,000 are not entitled to a $50 property tax credit, unless they are age 65 and older or disabled. Taxpayers age 65 and older or disabled receive the $50 credit automatically with their rebate check. Circuit Breaker Requirements Benefits Homeowners whose income is $250,000 or less... Up to a $2,000 rebate Renters age 65 and older or disabled whose income is $100,000 or less... Up to a $860 rebate Renters under age 65 whose income is $100,000 or less... Up to a $350 rebate Deferral Program... None Sources: AARP 2007 telephone survey of state legislative staff, state departments of revenue, state controllers offices, state assessors offices, and state treasury offices. 234
V. Real Property Tax Limits, Caps, or Freezes (2007) To qualify for the property tax freeze for 2005, homeowners age 65 and older or permanently disabled must meet the following eligibility requirements: (1) have an income of less than $41,972 (single) or $51,466 (married, filing jointly) in 2005; (2) have an income of less than $43,693 (single) or $53,576 (married, filing jointly) in 2006; (3) have lived in their homes for at least three years; (4) have been New Jersey residents at least 10 years. The reimbursement for the year 2006 equals the amount of property taxes paid in 2006 that exceeds the amount paid in the base year (the first year that a homeowner met all of the requirements). The base year could be as early as 1997. VI. Local Expenditure Limits (2007) Local municipalities and counties cannot increase their appropriations by more than 4.0% or the cost of living (price deflator for state and local government purchases of goods and services), whichever is less, over the previous year. Exceptions to this limit include capital expenditures, homeland security requirements, and any amount approved by referendum. Sources: AARP 2007 telephone survey of state legislative staff, state departments of revenue, state controllers offices, state assessors offices, and state treasury offices. 235
State and Local General Expenditures, FY 2005 General Expenditures Average Annual Expenditure Change 1995 2005 Percent of Personal Per Capita Income (millions) NJ US NJ US NJ US State/Local Direct General Expends... $77,457 $8,900 $6,794 21.4% 20.7% 6.2% 5.8% To State/Local Government... $77,359 $8,889 $6,778 21.4% 20.7% 6.2% 5.8% Education*... $26,577 $3,054 $2,325 7.3% 7.1% 6.5% 6.2% Public Welfare... $9,125 $1,048 $1,221 2.5% 3.7% 2.6% 6.5% Health and Hospitals... $2,805 $322 $574 0.8% 1.8% 3.0% 4.9% Highways... $3,142 $361 $418 0.9% 1.3% 1.1% 4.9% Public Safety*... $5,890 $677 $599 1.6% 1.8% 4.4% 5.8% Environment... $4,862 $559 $383 1.3% 1.2% 5.0% 4.7% Interest on General Debt... $2,629 $302 $273 0.7% 0.8% 2.2% 3.6% Other... $22,331 $2,566 $985 6.2% 3.0% 12.0% 6.1% To Federal Government... $98 $11 $16 0.0% 0.0% 5.7% 2.5% *Education includes higher and lower education; public safety includes police, fire, corrections, and protection and inspection. Source: U.S. Bureau of the Census (2005 data are the most current available.) State and Local General Expenditures, FY 2005 (excluding payments to federal government) Education 29% 34% Public Welfare Health and Hospitals Highways Public Safety 3% 6% 8% 4% 4% 12% Environment Interest on General Debt Other Total Debt Outstanding Long-term Debt Short-term Debt 2005 Debt Ratio Measures Per $1,000 Debt (billions) Per Capita of Personal Income Debt (billions) Percent of Total Debt (billions) Percent of Total New Jersey (State and Local)... $72.9 $8,375 $201.53 $70.3 96.5% $2.56 3.5% United States... $2,067.0 $6,970 $212.82 $2,036.0 98.5% $31.00 1.5% Source: U.S. Bureau of the Census 236